Alex Oakley, BPA Transaction Manager, at Standard Life, part of Phoenix Group: "Funding levels for UK defined benefit pension schemes remained stable in September. The aggregate section 179 funding ratio for the 5,050 schemes in the PPF 7800 Index now stands at 148.4 per cent at the end of September 2024, compared to 148.2 per cent at the end of August 2024.
“Despite recent economic headwinds, including the Bank of England's decision to maintain interest rates amid persistent inflationary pressures, the aggregate surplus of DB pension schemes has remained robust. This continued period of funding stability has provided schemes with the opportunity to develop comprehensive endgame strategies, focusing on long-term planning and funding sustainability. “Well-funded schemes continue to develop solid foundations which will prove essential when seizing endgame opportunities and all of this contributes to a positive picture for the de-risking market in 2024.”
Vishal Makkar, Managing Director, UK Wealth Consulting at Gallagher, said: “In August, the index saw a slight dip in the overall aggregate surplus, bucking the upbeat trend of the recent months. In September, the anomaly corrected itself, with 4,587 schemes now in surplus, cementing the strong position of DB funding levels in the sector. As surplus levels continue to climb upwards, the government will soon be looking to leverage these assets to foster growth in the UK. The pension sector is a huge engine for economic growth, and the upcoming Autumn budget will not be blind to this fact.
“DB schemes will continue to contribute to the country’s economic future, but the responsibility rests with trustees and sponsors to ensure their scheme is running on a suitable strategic foundation. With the new DB funding code set to come into force in November, long-term risk management will be top of mind. Given the potential scope for regulatory change in light of both the new code and the upcoming budget, trustees may be inclined to reassess their plans depending on how the legislative landscape evolves over the coming months.”
Sarah Elwine, Actuarial Director at Broadstone: “Defined benefit pension scheme funding continues to remain steady as we enter the final few months of the year. “It sets the foundation for a period of intense activity in the de-risking market especially given the strong pipelines recently stated by insurers through their half-year reporting cycle. The volume of smaller transactions through H1 2024 provides reassurance that for, well-prepared schemes, de-risking is achievable for schemes of all sizes however we still expect a significant number of deals for much larger schemes to be announced in the last quarter of the year.
“With another new entrant joining the bulk annuity market last week, trustees now have even more available options. With that in mind, trustees and sponsors should prioritise the same long-term objectives so they can decide on the best end game option for them. This includes managing funding and investment risk to reduce volatility, ensuring good quality administration to keep members secure and happy as well as appointing advisers that provide value for money.”
PPF publish the PPF 7800 Index figures for September 2024
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